In the early 2000’s, companies like Atlassian were revolutionising the way software development was tracked and managed with the introduction of Jira. It was also part of the nascent trend to deliver software services via a web or mobile interface, commonly known as an App.
Today, the App market is projected to reach $430.90 billion in 2022, rising to $614.40 billion by 2026, according to Statista.
One company that was both early to this trend and born in the wake of Atlassian’s innovations and explosive growth is Appfire.
Appfire, an enterprise collaboration software company, launched in 2005 as an original partner in the Atlassian software ecosystem. Headquartered in Burlington, Massachusetts, the company was founded by Randall Ward, CEO and Mat Gauvin, COO. This founder’s journey story is based on my interview with Ward,
“We started this company in 2005 because we believed that applications were shrinking. And they were becoming apps. We were working with Red Hat on open source modules. Browsers like Mozilla and Firefox had pluggins at the time and I could see that thesis forming that apps were becoming pluggable, in that companies were building extensibility into their models,” says Ward.
API’s hadn’t yet caught on, though Ward rightly predicted the trend and joined with Gavin to launch a company that would help companies develop their Apps. He also saw that IT executives were no longer pushing specific tools on their developers and allowing them to select tools that they wanted to work with.
“I was unlucky. In the organisation I was with, we were not allowed to select our own tools. But guess what, we still booted them underneath our desktops. So literally, right there at Vodafone, I had Atlassian Jira, under my desktop. I fell in love with those types of application companies that believed in extensibility. So that’s how we were formed. We’ve been on quite the journey downstream from Atlassian over the years, building what is quite an extraordinary SaaS story because we are downstream from another manufacturer,” says Ward.
The pair bootstrapped the company by focusing on customer success and their SaaS subscription business introduced in 2017 gradually grew the business to a $10 million annual run rate by 2019. Its “Bob Swift”, “Feed Three”, and “Wittified” brand apps available through their Atlassian ecosystem model help teams at companies like Google, Amazon, and Starbucks streamline product development through improved collaboration, security, reporting, and automation.
“We’re really humbled in our story because we built that story based upon our original premise and its proven itself true. But we’ve also become a company that’s downstream working very closely with our competition. We’re inside an ecosystem and, now, every major SaaS company that you follow, and that Forbes tell stories on the most successful ones that have built durable multigenerational businesses, they have one thing in common, and that’s they have downstream ecosystems with vendors,” says Ward.
In 2020, the company participated in its first institutional fund round with a $49 million placement from Silversmith Partners. That investment helped turbo-charge the company’s growth, reaching more than $150 million in annual run rate by 2022. And in 2021, TA Associates invested another $100 million in private equity into the business, bringing the total outside investment to $149 million, giving the company a valuation exceeding $1 billion.
“We’ve doubled the size of this business over the last two years. We went from under 200 employees to now over 750 ‘fireflies’, as we call ourselves, worldwide, “ says Ward. Appfire now has a global presence with employees operating on some 20 countries. The company doesn’t have a direct to customer sales force and relies on its channel partners, including over 800 resellers around the world, who represent their products.
While the outside investment clearly helped the business grow, the founders did not take the idea lightly. Taking a page out of the Atalassian founders’ approach to choosing a VC firm, they used a reverse term sheet model. “I borrowed from that strategy. I spoke with Scott [Atlassian co-founder Scott Faquhar] prior to selecting an investment partner to make I had the right parameters in mind,” says Ward. The process took two years before they selected Silversmith Partners.
Ward grew up 45 minutes west of Boston in the small town of Maynard, Massachusetts, close to the headquarters for Digital Equipment Corporation founded by legendary entrepreneur Ken Olson. His father passed away from cancer when he was 7 and the experience was so traumatizing it left the young Ward speechless and subject to heckling at school.
“My mom’s best friend was the executive assistant of Ken Olson and she had a great idea. She said, ‘Why don’t we bring them to DEC and let Randall just be an engineer child and walk around and roam a million square foot mill building in Maine or Massachusetts,” says Ward. So at the age of seven he got to learn and tinker with some of the world’s best software and hardware, where he would collect broken parts off of the assemplyline, take them apart and try to learn how they were made and ask questions by writing on paper.
The engineers at DEC took a liking to him took him and one day, as he sat in on a white board meeting, he had questions he wanted to ask the engineers and began to speak again, thus finding his voice and setting Ward on his path to becoming a technology entrepreneur.
“Ken took me under his wing as often as possible, he would sit me down, and I could ask him anything about the business and actually learned the value of being a CEO. I learned that great businesses are built by people who surround themselves with great people, no matter what you’re building,” says Ward. He also learned that profitability is one of the best keys to building a long term durable business. Sadly DEC didn’t have the profits available to invest in new desktop technology and the company eventually was merged with Compaq and much of the business sold off in pieces. “So from day one at Appfire, I’ve wanted to build a profitable business. And we’ve been profitable since day one.”
As for the future? “We have a really wild audacious goal of being at the intersection of the way every team works. We see this business as potentially being a public business someday. We have to be fortunate enough to be there. But we’re putting in the hard yards now to be able to put that work and instrumentation in place, measuring our business and treating ourselves with the right types of hygiene and format,” concludes Ward